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Ethiopia Opens Doors to International Banks in Domestic Financial Sector

Ethiopia Opens Doors to International Banks
Biruk Taye, head of Ethiopian Capital Market Authority (Public Domain)


By Staff Reporter

ADDIS ABABA – (BORKENA) – The Ethiopian Capital Market Authority, which is responsible for regulating financial services, has been instructed by the Ministry of Justice to begin issuing licences to foreign banks, according to sources.

The head of the authority, Biruk Taye, confirmed the news and reports that this is a significant move for the country’s financial sector.

Ethiopia has opened its economy to foreign investment, which has allowed companies like Safaricom to enter the domestic market, Biruk said. 

However, analysts report that the unpredictable regulatory environment, security breaches, and overall economic instability have hindered operations of these companies.

The report noted that investment banks are currently non-existent in Ethiopia and further mentioned the difficulty in obtaining loans due to high collateral requirements by existing commercial banks. Biruk stated that the demand for financial capital is high in Ethiopia.

 However, borrowers asking for 25% interest and 70% collateral is an obstacle to increasing capital.


The report highlighted that Ethiopia is experiencing a significant foreign currency shortage. Last month, it missed a $1 billion bond payment, resulting in a $33 million default.

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3 COMMENTS

  1. Good start. However, the regulatory framework would also need to be updated/modernized concurrently to attract any foreign investors. That would include, inter alia, lifting control on lending and deposit rates, protecting depositors’ money, setting transparent and enforceable rules for recovery of capital including profits, changing rules that forbid nationals residing in the country from owning foreign exchange, liberalizing the foreign exchange market, overhauling the choking bureaucracy, etc, etc.

    Others with purported advanced degree in the subject may add their own professional ideas on the matter. Linking the subject with complaints, no matter how well articulated in impressive sounding language, would not do. Show your beef (:-).

  2. Does the introduction of foreign banks to Ethiopian financial market solve problems we are facing today?
    I don’t think.
    Our problems will not be solved by bringing foreign banks alone.
    We have to solve our domestic political, economic and social problems through dialogue and consensus.
    Getting access to foreign banks alone doesn’t improve our negative balance of payments in short term. Rather,it aggravates the problems by destabilising the local ethinic based infant banks .
    The question of stability and guarantee to foreign investors is vital.
    The expectation of foreign investors is based on political stability and economic growth.
    There is no trend for Ethiopian economic growth.
    The other bottleneck to our economy will be the capital flows( in and out).

  3. From the beginning of this point,the issues Will be important for our country to prosperous our countries through foreign direct investment and foreign currency exchange,this mean that when foreign Bank entering to our country one benefit our country seeking is currency problem may be solved through its operation,in other hand competent employees are increasing through digital technology aspect ,and also knowledge share is created between foreigner invester and domestic invester .so Ethiopia is benefited from opening doors to the international banks ,for this the main point must the government emphasis is available legal framework for international banking operation and the way of capital market strategy to be implemented and followed in Ethiopia. weather it’s follow preconditions in Ethiopians regulations and proclamation state for business legal framework.

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